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Wall Street sells off; Fed sticks with cuts

NEW YORK — U.S. stocks dropped more than 1 percent on Wednesday, hitting session lows after the Federal Reserve stuck with its plan to scale back stimulus even in the midst of emerging market turmoil.

With the day’s decline, the S&P 500 is down 4 percent for the month — its worst monthly loss since May 2012. Some investors have been bracing for a correction, given the S&P 500’s gain of 30 percent last year.

Trading was volatile after the Fed’s move, which further reduces its monthly bond purchases by $10 billion a month. Declines were fairly broad-based, with nine of the 10 S&P500 sector indexes ending lower. Shares of Boeing Co. ranked among the biggest drags on both the Dow and the S&P 500.

Overall improvement in the U.S. economy suggested the central bank would continue to cut the purchases, but some investors had speculated in recent days that the Fed might rethink its plan because of the emerging market problems.

“I think investors had hoped that the Fed would somehow respond to the recent turbulence and show they had their back,” said Jack Ablin, chief investment officer of BMO Private Bank in Chicago.

But the Fed really wants “to move to the sidelines here and get out of the QE business.”

In its announcement, the Fed said it would buy $65 billion in bonds per month starting in February, down from $75 billion now. In what was Fed Chairman Ben Ber-nanke’s last policy-setting meeting, the central bank also maintained its longer-term plan to keep U.S. interest rates low for some time to come.

The benchmark S&P 500 has lost ground in four of the past five sessions as fears over slowing growth in China and large capital outflows from developing markets prompted investors to seek safe-haven assets.